Big ticket residential remodeling activity nationwide in the fourth quarter of 2018 rose 4.8% from the year-earlier period, Metrostudy announced in its release of the latest Residential Remodeling Index (RRI). The index reached an all-time high of 116.7 in the quarter, a 0.8% increase from the third quarter of 2018.
The RRI value means that the economic conditions known to influence remodeling activity are 16.7% better than the old peak in early 2007, just before the Great Recession. The growth of the RRI from the third quarter marks the 27th consecutive quarter of year-over-year growth for the index.
The forecast projects continued growth in the RRI over the next several years, but growth in 2019 and 2020 is expected to be at slower rates compared to the past several years of the index. The moderate gains projected will be closely tied to the maturation of the housing cycle, according to Metrostudy.
“The remodeling market remains busy as the nation continues to see strong job growth and record levels of home equity, especially in equity rich coastal markets. We expect continued growth for the industry in 2019, with some stabilization, mostly due to the slowing in existing home sales, which will sap some potential,” said Mark Boud, Chief Economist at Metrostudy.
Boud says the housing cycle is running to “the late innings” as homeowners begin display responsiveness to higher mortgage rates. Continued rising mortgage rates over the next several years are projected to dampen home sales and persuade homeowners to stay put and renovate in their current homes, Boud said.
The RRI is based on a statistical model that takes into account data such as household-level remodeling permits, employment statistics, and a market’s economic health. It uses that model to predict the number and dollar volume of home improvement and replacement projects worth at least $1,000.
Metrostudy projects the number of remodeling projects worth $1,000 or more will rise to 12.9 million, a 3.1% increase year-over-year. Big-ticket exterior projects and siding projects are projected to have the biggest increases from 2018. The inflation-adjusted value of big-ticket remodeling projects in 2018 is predicted to increase 4.7% to $203.5 billion.
According to Metrostudy, 379 of the 381 metro areas surveyed will see growth in project volume for 2019 and these markets will experience an average growth of 3.0%.
